Subscription Churn: Why You Should Care (+ How to Beat It)

Until recently, subscription programs were set it and forget it, acquire and hope they don’t leave. There just wasn’t much data available outside of how many subscribers you acquired and how many churned.

Today, we can see which products have higher churn rates, how long subscribers keep their subscriptions before they churn, their churn reasons, and so much more.

That’s why calculating churn isn’t so simple anymore. You have to take into account all of the impactful factors, such as lack of perceived value, engagement rates, discounts, and gifts you’ve applied.

We can get into how we fix subscriber churn rates after. But first, let’s define subscriber churn as it stands today.

Subscription churn: what it is, how to measure it, and why it matters

Churn sometimes feels like something you can’t control. Something that you can easily write off because, well, you have a damn-fine product, but not everyone is going to like it. You’ll just acquire more subscribers, and the right fit will stick around naturally, right?

Yeah, well, we like mushroom coffee as well as the next enlightened ex-caffeine addict, but if the container is shattered and that naturally nougetty goodness spills from the appendage every time I get it in the mail, I might have a few words to say.

But if I have a hard time telling you about it, and an even harder time getting a rectification (yuck, poor customer service)… I’m very likely to scour the internet for a new fix.

Look, we can only tell you why your subscribers churn if you’re using our analytics dashboard (we can also warn you of those at risk of churning, too, but let’s keep this simple). Right now, we’re just here to help you calculate and correct churn.

Defining subscriber churn rate

Subscription churn is defined as the percentage of subscribers who cancel their subscription during a given time period.

A high subscription churn rate can directly impact financial health, eating away at monthly recurring revenue. If your customer retention rate is weak, you’ll have to lean more on acquisition, a costly and challenging activity.

How to calculate your churn rate

Subscriber churn rate is the percentage of subscribers who have discontinued their subscription within a given period of time.

To measure it, divide the number of churned subscribers by the number of starting subscribers. Multiply the result by 100 to get a percentage.

Here’s the churn rate formula:

Churn rate = (churned subscribers / starting subscribers) x 100

All the reasons calculating customer churn matters

We all know that customer churn is an essential benchmark that provides an aerial view of the health of your subscription program, if not your brand as a whole.

For stakeholders, seeing churn up and down might be enough. But a deep look into your subscriber churn, paired with proactivity, has a far greater impact on the success of your subscription business than we’ve yet let on.

But consider these benefits of your due diligence:

• Customer feedback: paying attention to your churn means you’ve optimized your cancellation surveys to rake in those delectable morsels of customer insights. 
• Lower customer acquisition costs: reducing churn naturally lowers your CAC and your operational efficiency. The more often and longer you keep your subscribers, the more cost efficient it is for you. 
• A sign of good business health: obviously, you want to signal to stakeholders that you can retain a good number of customers just as well as you can bring them in. 
• Recurring revenue: you can either boost your AOV by encouraging bulk purchases or bank on recurring revenue. A steady, recurring revenue is the more advantageous for most brands.
• LTV: if your customers aren’t sticking around, your LTV will be low, as will your total revenue. Your costs will be higher, too. 
• Compounded growth impact: losing a customer means losing long-term revenue, any referrals they might have brought in, and potentially damaging traffic if they leave reviews that turn potential customers away. But if they stay, they bring in recurring revenue, referrals, positive reviews, and stability. 
• Brand reputation: a high monthly churn rate damages your brand in more ways than one. Aside from negative reviews people leave online, there’s also word-of-mouth negativity and the media. All of this builds to create a brand perception that may not be favorable.

Identifying factors affecting your company’s churn rate

Your average churn rate is an important metric for overall business health, but doesn’t give you much actionable information. That’s why you need to dig deeper, to identify your most vulnerable touchpoints and your highest churning products.

Lack of perceived value

Customers cancel their subscriptions when they no longer feel a product meets their needs or provides sufficient value. This might be because of the availability of alternative options, an overall lack of customer satisfaction, or simply that their preferences have changed.

Additionally, if customers perceive the subscription is too high for the value they receive, they may be inclined to cancel, or if prices increase suddenly or frequently without clear justification.

Frustrating subscriber experience

Customers want to be able to manage the details of their subscription programs without dialing up your CX team (and your CX folks want that, too!). Put subscribers in the driver’s seat with a seamless portal that makes it easy to skip or delay shipments, swap items, and more.

Of course, there’s no guarantee they’ll never need support, so when they do, ensure you can deliver a prompt and helpful response. Inadequate or slow support can frustrate subscribers when they encounter issues or have questions.

Lack of engagement or usage 

If customers find little utility in their subscription or realize they’re amassing a stockpile of your products in their pantry, they may discontinue the subscription. Inactivity or underutilization can signal a lack of engagement, increasing the likelihood of churn.

Reduce subscriber churn with an optimized customer journey

Once you know which products correlate with the highest subscription churn, and which points in the subscription lifecycle are the most vulnerable, you can build a subscriber experience that gets ahead of those challenges.

Build an engaging onboarding sequence

Educating customers on the benefits of their subscription and how to navigate and customize it can significantly reduce churn. So, set the proper foundation for new customers right away.

Provide clear instructions. Educate them about the benefits of your subscription services. Help them understand how to get the most value from their subscription across the customer lifecycle.

Offer strategically timed incentives and upgrades

If you’re trying to get more subscribers past the churn plateau at, say, order six, try testing small ways to surprise and delight them on orders two or four. You can look at your risk analysis to see which order points typically see the highest subscriber churn rates, and test different offers to see what works.

Offering free gifts to subscribers is a great feature, and Obvi tested how those free gifts impact their subscription numbers.

Risk Forecasting can help you see which churn risks are most likely to occur at certain points in the customer lifecycle.

Using Risk Forecasting can help you see which churn risks are most likely to occur at certain points in the customer lifecycle.

Keep subscribers engaged over time

Leverage customer data to offer personalized recommendations, targeted promotions, and relevant content to help you demonstrate that you understand and value your customers.

Targeted retention campaigns and promotions, such as exclusive discounts, customer loyalty rewards, or referral incentives, can encourage customers to stay.

Offer alternatives to cancellation

When you find a pattern to understand why customers typically cancel their subscriptions, one solution is to set up customized cancel flows to get them to stay. 

Giving subscribers more control and flexibility over their subscription can help retain them by aligning with their individual preferences and circumstances.

Ever and Ever uses Stay AI’s RetentionEngine, which optimizes user actions for the most desirable business outcome. When someone goes to cancel their order, they first see a screen with possible alternatives. When someone goes to skip, we ask them whether they’d like to gift it to someone. And when someone goes to pause, we ask them whether they’d like to just skip this next shipment.

Ever & Ever is seeing consistent redemptions on these alternate offers, allowing them to minimize monthly churn and reduce cancellations and skips.

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